1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION
2 5901 GREEN VALLEY CIRCLE
3 CULVER CITY, CALIFORNIA
4
5
6
7
8 REPORTER'S TRANSCRIPT
9 OCTOBER 23, 2012
10 CORPORATE FRANCHISE AND PERSONAL INCOME TAX HEARING
11 APPEAL OF
12 GERALD J. MARCIL AND CAROL L. MARCIL
13 NO. 458832
14 AGAINST PROPOSED ASSESSMENT OF
15 ADDITIONAL INCOME TAX
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23
24 Reported by: Juli Price Jackson
25 CSR No. 5214
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1
1 P R E S E N T
2 For the Board Jerome E. Horton
of Equalization: Chair
3
Michelle Steel
4 Vice-Chairwoman
5 Betty T. Yee
Member
6
George Runner
7 Member
8 Marcy Jo Mandel
Appearing for John
9 Chiang, State Controller
(per Government Code
10 Section 7.9)
11 Joann Richmond
Chief
12 Board Proceedings
Division
13
14 For Board of Grant Thompson
Equalization Staff: Staff Counsel
15
16
17
For Franchise Tax David Gemmingen
18 Board: Tax Counsel
19 Michael Cornez
Tax Counsel
20
21 For Appellants: Layton L. Pace
Attorney
22
Gerald J. Marcil
23 Taxpayer
24 ---oOo---
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27
28
2
1 5901 GREEN VALLEY CIRCLE
2 CULVER CITY, CALIFORNIA
3 OCTOBER 23, 2012
4 ---oOo---
5 MR. HORTON: Good morning -- good morning,
6 Members and guests, let us commence the meeting of the
7 Board of Equalization.
8 Ms. Richmond, what is our first matter?
9 MS. RICHMOND: Good morning, Chairman and
10 Members.
11 Our first item on today's agenda is the item B,
12 the corporate franchise and personal income tax
13 hearings.
14 Our first oral hearing is B1, Gerald J. Marcil
15 and Carol J. (verbatim) Marcil. Please come forward.
16 Board Proceedings has received contribution
17 disclosure forms for this morning's hearings from
18 parties, participants and agents. All forms were
19 properly completed and signed. All parties,
20 participants and agents are on the alpha listings
21 provided to your office.
22 Each person sitting at the table will be asked
23 to introduce themselves and, if necessary, their
24 affiliation with the taxpayer for the record. Ten
25 minutes is allocated for the taxpayer's opening
26 presentation, followed by ten minutes for the Franchise
27 Tax Board's presentation. And five minutes is allocated
28 to the taxpayer for rebuttal.
3
1 Mr. Horton.
2 MR. HORTON: Thank you.
3 Mr. Thompson, would please introduce the issues
4 in this case?
5 MR. THOMPSON: Good morning. The issue in this
6 case is whether Appellants' limited partnership engaged
7 in a qualified 1031 exchange.
8 MR. HORTON: Good morning to the taxpayer. You
9 have ten minutes to make your presentation. We would
10 ask that you introduce yourself for the record.
11 MR. PACE: Good morning. I'm Layton Pace.
12 I'm counsel for the Appellants.
13 This is Gerald Marcil to my left here. He is
14 the Appellant.
15 As just stated, the issue is about whether or
16 not a partnership, Hollywood Vista Associates, HVA,
17 completed a like kind exchange.
18 In a like kind exchange, the gain doesn't go
19 away. The gain is just deferred. So, when the later
20 property is sold, the gain is then taxed.
21 We believe that the issues in this hearing are
22 really legal more than factual. We think many of the
23 factual issues have already been concluded. We think
24 that they've really boiled down to two main factual
25 issues or two main factual transactions.
26 The first transaction was the exchange by HVA.
27 HVA, on November 14th, 2001, sold property that it held
28 for investment. On November 20th it acquired a 60
4
1 percent undivided interest in property called the
2 Manchester property and it completed a like kind
3 exchange.
4 The second transaction is by the end of the
5 year, in particular, on December 15th, 2001, HVA took
6 the property it had acquired and it conveyed that
7 property to another entity, Manchester Development, LLC,
8 or MD LLC. It -- HVA then promptly liquidated by the
9 end of the year. It engaged in this transaction to
10 reduce the number of entities, to save the $800 annual
11 tax that would been imposed if the entities had been in
12 existence at the end of 2002.
13 The Appellants have two legal positions for why
14 the 1031 exchange should be upheld. The first is it's a
15 straightforward application of 1031, that is, that they
16 acquired the Manchester property and held that property
17 for investment. There are a series of cases, two cases
18 in particular, one's a Ninth Circuit case, one's a
19 fully-reviewed Tax Court case, they're called Bolker and
20 Maloney.
21 In Maloney a corporation acquired property on
22 December 28th of 1978. On January 26th of 1979, or
23 within a month, the corporation that bought the property
24 did the exchange, liquidated and distributed the
25 property it acquired. And the court said that is a good
26 1031 transaction, that even though the corporation
27 liquidated, the investment was not liquidated, that the
28 holding purpose of 1031 had been satisfied.
5
1 The second position -- and this is one we've
2 had a lot of debate on -- is that there was a merger or
3 a consolidation that continued HVA, that Manchester
4 Development was itself a partnership and that when you
5 combine two partnerships together, and the larger of the
6 two of them is the one that the owners have more than 50
7 percent of the resulting partnership after the
8 transaction, you have a continuation of the first one.
9 In other words, when the two came together --
10 when HVA and MD LC (verbatim) came together, HVA
11 survived because the Marcils owned more than 50 percent
12 of it and HVA had a 60 percent piece of the Manchester
13 property and Manchester Development only had the 40
14 percent piece of the property.
15 The Appellants think that the Respondents rely
16 largely on form in trying to attack this transaction
17 because in -- in a prior hearing they admitted that if
18 MD LC (verbatim) had just taken the 40 percent piece and
19 put it into HVA, that there wouldn't have been a
20 problem.
21 So, if you have the same partnership with the
22 same owners and the same property and you just reverse
23 the direction of the transaction, the Franchise Tax
24 Board said they wouldn't have had a problem.
25 Additionally, if the new money had just come
26 in, directly into HVA, and hadn't started off at
27 Manchester LLC, again HVA would have just done an
28 exchange and still held the property. So, the Franchise
6
1 Tax Board is coming up with a very technical argument to
2 try to invalidate the exchange.
3 Much of the debate has been whether or not
4 there had to be a formal State law merger to combine
5 these two entities in order for HVA to continue. The
6 rehearing summary concludes, on page 25, that it's
7 staff's opinion that a State law's test for a merger is
8 not required. You don't to have follow the Corporation
9 Code provisions in order to have the income tax laws
10 treat HVA as being the continuing partnership.
11 The other point that needs to be made is that
12 all that's required for continuation is that the Marcils
13 own more than 50 percent of the surviving partnership
14 after the transaction. They don't have to -- there's --
15 you'll hear a lot of testimony here from the FTB about
16 what was the percentage interest the Marcils owned
17 before the transaction. The law does not look at the
18 percentage of ownership of the Marcils before the
19 transaction. The law looks at the percentage ownership
20 after the transaction. So, much of their argument
21 doesn't make sense for purposes of applying this -- this
22 provision of the Code.
23 Because of the fact that -- of these arguments,
24 we believe that this Board should hear for the -- for
25 the Appellants and rule that their exchange was a valid
26 exchange. Thank you.
27 MR. HORTON: Thank you very much. We will
28 return and allow you five minutes on rebuttal.
7
1 We'll now go to the Department. The Department
2 will have ten minutes to make their presentation. We
3 would ask that you commence with your introductions for
4 the record.
5 MR. GEMMINGEN: Good morning, Board Members.
6 I'm David Gemmingen, Tax Counsel for the Franchise Tax
7 Board, with me is Michael Cornez. We represent the
8 Department in this appeal.
9 This appeal's a rehearing concerned with the
10 Board's prior confirmation of Appellants' tax
11 contributable to gain derived from a partnership's
12 profitable sale of an apartment complex here in
13 California.
14 First, I'd like to address the misstatement by
15 opposing counsel that the only test required under the
16 regulations is the Marcils' ownership of more than 50
17 percent in the surviving entity. Regulations under
18 708(c)(1) require that there be a weighing and a testing
19 of the fair market value, net of liabilities, to
20 determine which entity contributed the most assets and
21 that's net of liability. So, it's not a -- just a
22 simple ownership test, rather it's a factual test, which
23 Appellants, as I'll demonstrate, failed to establish in
24 the prior hearing.
25 In a recent article on substance over form
26 doctrine in Vanderbilt Journal Transact -- Transnational
27 Law, the article begins,
28 "It would be difficult to imagine how the
8
1 federal tax system in the United States could
2 function without a substance over form
3 principle. Every analysis of the tax treatment
4 of a transaction or transfer must explicitly or
5 implicitly address the question, 'Will the tax
6 law treat this as it appears to be?'"
7 It's demonstrated by Exhibit 10 before you in
8 my hearing book of exhibits. Your Board has expressly
9 sanctioned a step transaction doctrine and Appellants'
10 focus on Section 708 does not override the longstanding
11 principle, the true nature of a transaction may not be
12 disguised by mere formalisms which exist to solely alter
13 tax liabilities.
14 Under the step transaction doctrine, federal
15 tax liability and State tax liability is to be based
16 upon a realistic view of the entire transaction, rather
17 than artificial devices.
18 With respect to the error of law, in Aguilar
19 versus Atlantic Richfield, California Supreme Court
20 explained as a general matter orders granting a new
21 trial are examined for abuse of discretion. The Supreme
22 Court further explained there is no discretion to adopt
23 a reading or make an application on decisional law that
24 is inconsistent with the law itself. Any such reading
25 or application must necessarily be deemed an abuse.
26 Thus, we need to simply find that your Board's
27 prior decision was consistent with principles of law and
28 can be supported by these principles, including the
9
1 substance over form in step transaction doctrines, that
2 the arc of the transactions and facts at issue, starting
3 from MD's -- Manchester Development's formation and
4 independent contractual obligation to buy the Manchester
5 property in May 2001, well before HVA's decision to sell
6 its own apartment building, followed by MD -- Manchester
7 Development's ownership of 100 percent of the Manchester
8 property within a few months supports the finding that
9 the substance of the transaction was that a different
10 legal entity held and operated the Manchester property
11 and as this holder did not relinquish property, the
12 result is that a 1031 exchange did not occur.
13 This matter really is a case about the proper
14 and ordered priorities of applicable legal principles.
15 When one asks,
16 "Why are we having this rehearing?"
17 And taxpayer claims an error of law, we have to
18 look at whether -- whether there's really an error of
19 law or the Appellants themselves are attempting to
20 incorrectly substitute one principle as a governing law
21 while ignoring other established legal principles that
22 clearly take priority in determining whether a compliant
23 1031 exchange took place.
24 Appellants' argument is yet another attempt to
25 reshuffle the facts and law to suit their multiple
26 objectives, which includes civil liability protection
27 obtained by having Manchester Development, LLC hold and
28 operate the Manchester property while abandoning their
10
1 prior ownership documentation in the Manchester
2 Development to fabricated deemed 1031 exchange and
3 merger.
4 Moreover, Appellants failed to estab -- satisfy
5 their multiple burdens of proof to not only establish
6 Respondent's determination of tax liability is
7 incorrect, as well as the correct tax liability, but
8 another, even higher hurdle that an error in law took
9 place with respect to the last hearing.
10 In order to satisfy their initial burdens, as
11 previously noted by your Board in many appeal decisions,
12 Appellants had to provide credible and independent
13 evidence. Appellants failed to do so at the prior
14 hearing. They submitted no credible evidence to support
15 their claim that Mr. Marcil only owned 2 percent of
16 Manchester Development, LLC.
17 Furthermore, your Board has long held that
18 unsupported assertations by an Appellant will not
19 satisfy the Appellants' burden of proof. And that's
20 from the -- your Board decision forty years ago in the
21 Appeal of Camarati.
22 Thus, Mr. Marcil's statement at the prior
23 hearing that he only owned 2 percent of the Manchester
24 Development, LLC fails to overcome this burden to
25 counter Respondent's tax or determination. And it would
26 be error of law to to now find in favor of Appellants,
27 given that they have failed to provide any credible,
28 independent evidence for their unsubstantiated
11
1 contentions.
2 Furthermore, Appellants' argument that HVA is
3 the surviving entity in the deemed merger they maintain
4 is described in the regulations under Section 708,
5 likewise fails their burden and obligation to provide
6 independent evidence.
7 Various articles, Treasury publications and
8 Regulation 708(c)(1) itself require factual
9 substantiation to determine which entity is the
10 survivor. And Appellants provided no evidence to
11 support the required weighing of the fair market value
12 of assets, net of liabilities, they deemed were
13 contributed to surviving entities in order to determine
14 which entity contributed the greatest fair market value
15 of assets.
16 The failure -- Appellants' failure to provide
17 the evidence does not allow them to maintain that an
18 error of law occurred in application of Section 708.
19 Moreover, the substance over form doctrine, by
20 its nature, trumps any rogue application in isolation of
21 Section 708.
22 And in their opening rehearing brief,
23 Appellants claim that John Walsh contributed almost all
24 the funds to Manchester Development to enable it to buy
25 40 percent of the Manchester property. There is
26 regulations that require that we net liabilities and
27 value the property to determine the fair -- the net fair
28 market value contributed for purposes of determining the
12
1 surviving entity.
2 And that's HVA undertook substantial,
3 multimillion dollar debt with respect to its acquisition
4 of the 60 percent interest in Manchester property, as
5 evidenced by Exhibits 8 and 15 of our exhibits.
6 It's impossible, based upon the lack of
7 evidence submitted by Appellants, for them to
8 substantiate which entity contributed property which had
9 the greatest fair market value, net of liabilities. And
10 that failure makes it wrong to apply the 708 regulations
11 that deem HVA the survivor.
12 Finding for Appellants' based upon the faulty
13 application of 708 regulations would be an error in law
14 of itself.
15 Moreover, there may have been no merger at all,
16 as there has been no evidence submitted supporting
17 Mr. Marcil's prior 2 percent interest in MD LLC. And
18 the Manchester Development, LLC might have actually been
19 a single member LLC, prior to the contribution of the
20 property and, thus, been a disregarded entity. And then
21 there would have been no -- there would have been a lack
22 of two partnerships to merge.
23 Once again, Appellants' unsupported
24 assertations will not satisfy the burden of proof and
25 did not do so at the last hearing.
26 The Court of Appeals opinion in Bolker versus
27 Commissioner stated that a taxpayer may satisfy the
28 holding requirement for productive use in trade or
13
1 business or investment by the lack of either intent to
2 liquidate the investment or use it for personal
3 pursuits.
4 In this case, Appellants' use of the HVA sale
5 proceeds to satisfy their personal contribution
6 obligation to Manchester Development is an impermissible
7 use that causes the HVA to fail the holding test as an
8 additional reason to uphold your Board's prior
9 determination.
10 In Carol Marcil's declaration, dated
11 December 12th, 2011, files in exhibit to Appellants'
12 rehearing brief and attached as Exhibit 14 to my
13 exhibits before you, she stated specifically at
14 paragraph 4,
15 "I was aware that Gerald intended to buy
16 real property called Manchester property with
17 John Walsh. I agreed with him that HVA should
18 buy our interest in the Manchester property
19 with the sale proceeds from HVA property."
20 Clearly Appellants admit to using funds from
21 HVA's sale of property for the personal pursuit and
22 their separate and distinct investment in the Manchester
23 Development Limited Liability Company, a violation of
24 the Bolker's holding test.
25 Mr. Marcil clearly -- Ms. Marcil clearly stated
26 that the purchase was for her husband's personal account
27 and not for the partnership in which she was a partner.
28 The doctrine of duty consistency can apply to
14
1 events pertaining to only one year, as summarized in the
2 Ninth Circuit decision in the Estate of Hilda Ashman.
3 The Ashman court noted the United States Supreme Court
4 decision in R. H. Stearns, where a taxpayer had signed a
5 waiver of the statute of limitations, and after the --
6 when the Commissioner attempted to assess the tax, the
7 taxpayer claimed that the time had expired, but the US
8 Supreme Court upheld that the -- the waiver of statute
9 of limitations.
10 The Ashman court went on to state that,
11 "The duty, consistency and judicial
12 estoppel is a doctrine which precludes a party
13 from taking advantage by taking one position
14 and seeking to take a second advantage by
15 taking an incompatible position."
16 It's a doctrine based upon policies that seek
17 to foster orderly administration of justice, regard for
18 the dignity of judicial proceedings and preclude a party
19 from playing fast and loose with the courts.
20 As the Ashman court further noted,
21 "It's not even necessary that the contrary
22 positions be taken in court, existing positions
23 taken with an insurance carrier or an employer
24 on one hand and a court in the other can result
25 in judicial estoppel."
26 The Appellants' attempt in the prior hearing to
27 substitute the prior 50 percent documented interest in
28 Manchester Development with an assertation that they
15
1 owned 2 percent is such a lack of consistency.
2 So, in conclusion, the fundamental policy
3 behind the substance over form doctrine is that a single
4 event, viewed in isolation, should not dictate or mask
5 the actual complete transaction and the ensuing tax
6 consequences of a series of related actions should be
7 given effect.
8 Do not fall into the simplistic trap proposed
9 by Appellants that we only focus on unsubstantiated
10 Section 708 regulations, rather, as we did before,
11 review the entire sequence of events that began in May
12 2001 when Manchester Development, LLC was formed for the
13 purpose of acquiring 100 percent of the Manchester
14 property, to negotiate the September 2001 on its own for
15 the exclusive purchase of that parcel and can accomplish
16 that goal and owned 100 percent of the property within a
17 few months.
18 The result is only one entity sold the
19 Hollywood Vista Apartment and a different legal entity
20 owned and held the second property.
21 Appellants' reference to Maloney is also
22 mistaken because in Maloney the court first looked to
23 see whether the entity itself properly completed a 1031
24 exchange. And it found that there was an exchange of
25 real property.
26 Appellants' theory is that there was an
27 exchange of property followed by an immediate
28 contribution of that property in return for Manchester
16
1 Development membership interest, which are an intangible
2 personal asset. So, at the end of that transaction, HVA
3 gave up real property and ended up with intangible
4 personal property, which are not like kind properties
5 and fail the like kind test.
6 And, so --
7 MS. RICHMOND: Time has expired.
8 MR. HORTON: Can you wrap it up in a few
9 minutes?
10 MR. GEMMINGEN: -- and, so, their -- and, so,
11 Appellants are attempting to provide other examples of
12 ways they could have accomplished the result that they
13 didn't take. It's been longstanding law that once --
14 while taxpayers are free to choose the manner that they
15 wish to structure their affairs, once having done so,
16 they're bound by the tax consequences that they chose,
17 not what they might have otherwise done.
18 Thank you.
19 MR. HORTON: Thank you.
20 On rebuttal.
21 MR. PACE: Well, I -- I need to summarize his
22 statements. He -- he made many, many points of law
23 here.
24 The first is there really was an error on the
25 first hearing. I think that it was clear from the
26 rehearing summary that a State law merger is not
27 required. That was not an original summary of the
28 hearing. The rehearing definitely changes that.
17
1 Two, I think that it was confusing about the
2 2 percent or 50 percent because the law itself for
3 merger only looks at the ownership afterwards. The
4 pre-ownership is irrelevant. And I think that that was
5 an error of law that wasn't followed here.
6 Three, they didn't brief the step transaction
7 doctrine at all in their prior briefs or even set forth
8 how any of it applied. And it had to have been asserted
9 or had to have been followed in order for the Appellant
10 to have lost in the first hearing.
11 So, there really was an error of law at the
12 first hearing.
13 Two, this -- the step transaction doctrine does
14 not apply to this case. These are independent steps
15 that occurred for independent business reasons. It was
16 completely -- the HVA exchange was completed. There
17 wasn't a requirement to step them all together. The
18 time frame that was in the Maloney case was, in fact,
19 indicative of what occurred here. And Maloney is not
20 distinguishable on the facts.
21 I want Mr. Marcil to talk about the declaration
22 of his wife because I think it was an unfair parsing of
23 the words.
24 MR. MARCIL: Well, yeah, I think the State
25 attorney is confused.
26 We -- when we -- he's looking at the original
27 purchase documents. And when you're doing a purchase
28 transaction, sometimes the way that you finance it
18
1 during -- it's a six month escrow -- and when we
2 purchased it, we didn't actually know exactly how we
3 were going to finance it. My partner was short some
4 money and half way through I sold a property in
5 Hollywood called Hollywood Vista Apartments and then was
6 going to do a simultaneous exchange.
7 Instead, the buyer of that property couldn't
8 close on time for that. So, I borrowed a swing loan
9 from the bank, or bridge loan, gave that money to an
10 accomodator, who purchased the property, the entity.
11 All of these documents are in the record and --
12 MR. PACE: So, there was no personal use or
13 intended personal use of the property?
14 MR. MARCIL: Never was any money ever touched.
15 And the -- the exchange was good.
16 MR. PACE: I need to make sure I have more
17 time, also -- first time -- I've got to cut you off.
18 The first time that was raised about the fair
19 market values of the property, the 60 percent/40
20 percent, the very first time, the returns were filed,
21 the liabilities in these properties were asserted.
22 The closing escrow statements were submitted.
23 The property -- the only asset of HVA was a 60 percent
24 interest. The only asset of MD LLC was a 40 percent
25 interest. All that documentation on the valuation and
26 on the liabilities was submitted. There's -- there's no
27 failure to provide that documentation about the
28 valuations and which was the larger of the two
19
1 partnerships.
2 MR. MARCIL: Yeah. The point I want to make is
3 that -- and maybe my attorney made it -- was that it
4 doesn't matter how many times you change your agreement
5 before the close of escrow or how you -- how many times
6 you change the financing. It is what occurs at the
7 closing and from that point forward, after the closing,
8 not what happened before or how many times. 'Cause we
9 actually had a couple of conversations where we were
10 going to go 55/45, but we didn't end up that way. It
11 ended 60/40. And I'm sure he would have liked to have
12 had all those conversations documented, but it's
13 irrelevant. It only matters how it closes.
14 So, the exchange was good. At that time I had
15 Stewart Title do the title holding through a company
16 they call Asset Preservation, that's Lava Rock. And I
17 had American Express Tax and Business Services do the
18 services -- do the documents.
19 I wanted to sue them, but their attorneys and
20 my attorneys got together and there was no way for me to
21 sue them because everything was done right. It was a
22 legit exchange and there was no substance.
23 I've heard the State attorney say substance
24 over form or form over substance -- there was neither
25 one of those because, otherwise, I would have been able
26 to sue them and I would have -- I wouldn't be here right
27 now or they would have --
28 MR. PACE: One more statement --
20
1 MR. MARCIL: -- they would have handled it.
2 MR. PACE: -- one more statement here.
3 In the last hearing it was admitted that HVA
4 did a valid exchange, but for the fact that HVA folded
5 into MD LLC, it was good exchange. In testimony the
6 last time, they stated that. They cannot now come and
7 say that it wasn't a valid exchange.
8 MR. MARCIL: Yeah. It was a valid exchange and
9 then they say, "Well, what happened a month later
10 invalidated it."
11 But the merger of one entity -- or the two
12 entities together doesn't invalidate the exchange nor
13 did I ever take control of any cash. So, it's -- it
14 doesn't invalidate the exchange.
15 And I think my attorney adequately pointed out
16 ad nauseum in all of the previous documents that the
17 larger of the two entities has to survive for tax
18 purposes. Because otherwise people would merge an
19 entity with 99 percent into -- with an entity that was
20 1 percent and -- and then do a merger and say that the
21 99 percent entity didn't survive and get out of carrying
22 forward that -- that entity's tax liability.
23 MR. PACE: What would happen in that case --
24 MR. MARCIL: My --
25 MR. PACE: -- is you'd have all the losses that
26 were -- you would be able to cut off the year whenever
27 you wanted to cut off the year of the partnership and
28 have all of the loss or all the gain go for that period
21
1 to those taxpayers so that those taxpayers could save
2 taxes. They would play with the partnership tax year
3 to make income flow into their returns so that they
4 would minimize their taxes. It's not an elective
5 provision. It would be abusive to allow an election.
6 MR. MARCIL: I wouldn't even be here today if
7 I -- if when the accountant asked me which name I wanted
8 to use on the merger that could go forward and I wanted
9 to use Manchester, because the property was on
10 Manchester, instead of Hollywood Vista.
11 MS. RICHMOND: Time has expired.
12 MR. MARCIL: Okay. But had we used Hollywood
13 Vista going forward, it wouldn't have been kicked out of
14 the computer and we wouldn't be here today.
15 But that's okay, but you guys can cut me off
16 anyway, I --
17 MR. HORTON: Sir.
18 MR. MARCIL: -- that somehow that the -- the
19 documents were inadequate, but then later they said that
20 the merger documents were inadequate because they -- it
21 would destroy their case if the -- completely, if the --
22 if the merger wasn't adequate.
23 And if the merger was adequate, then the larger
24 entity survives. So, either way, there's -- there's no
25 case.
26 MR. PACE: Thank you. Thank you so much.
27 MR. HORTON: Does that conclude your --
28 MR. MARCIL: Yeah, the law must prevail, that's
22
1 all.
2 MR. PACE: We appreciate your --
3 MR. MARCIL: Just the law has to prevail.
4 MR. PACE: -- consideration. We appreciate you
5 having us back again.
6 MR. HORTON: Okay. Thank you very much.
7 I'm going to -- I'm going to go to the --
8 Members, I'm going to go to Mr. Thompson and just ask
9 him to elaborate on the step transaction doctrine and
10 how it applies or does not apply in this case.
11 MR. THOMPSON: Let's see -- well, I'll leave it
12 up to the Board as to whether the step transaction --
13 transaction applies.
14 But the general idea is that where you have
15 multiple steps that could have been accomplished in a
16 more direct form, you look through the substance of the
17 transaction to determine what happened.
18 And I -- I would say that both parties here
19 sort of pick and choose in terms of when they apply
20 substance over form or step transaction principles.
21 You know, FTB, on its side, seems to want to
22 parse this is out as two separate transactions.
23 On -- on the other hand, if you step it all
24 together, you know, maybe it looks more like a merger,
25 as Appellants contend.
26 I think Appellants also have been a little
27 guilty of mixing the content that -- the concepts as
28 well because they -- they will, on the one hand, say,
23
1 "Well, it's two separate transactions," then, on the
2 other hand, "We had a merger -- uh, uh -- later."
3 So, there's a -- just saying "step transaction"
4 here doesn't resolve the appeal, I think. It's the
5 question of how -- what do the Members determine
6 actually happened here and does it comply with 1031?
7 MR. HORTON: Thank you very much.
8 Discussion, Members?
9 Member Steel.
10 MS. STEEL: I want to ask Franchise Tax Board
11 that, uhmm, that it's a lack of consistency of the
12 Petitioner, but I want to know that since last hearing
13 that Franchise Tax Board considered some of the part
14 that, you know, you -- what you said at that hearing is
15 different than what here.
16 So, can you just give me just the difference
17 right there -- what considered and then what you really
18 going after?
19 MR. GEMMINGEN: I'm going after -- we've been
20 entirely consistent in our position. And, in fact, the
21 Appellants misstated our position.
22 We stated in our opening brief that the step
23 action -- step transaction applied. And we've said that
24 all along that it's -- the plan was initially for
25 Manchester Development, LLC to all along acquire the
26 Manchester property. And that's what ultimately
27 happened. Within the same year the purchase agreements
28 were consistently negotiated by Manchester Development,
24
1 LLC. And that was the ultimate entity that acquired the
2 properties.
3 We've been entirely consistent that the arc of
4 the transaction from Manchester Development, LLC wanting
5 to buy the property long before HVA ever thought about
6 selling its apartment building and then Manchester
7 Development ended up owning the property. That's the --
8 the series of events that occurred in this transaction.
9 We've always said that.
10 MS. STEEL: But you were talking about that the
11 Petitioner's wife was not named.
12 What happened to that community property in
13 California side?
14 MR. GEMMINGEN: It's still there but she's not
15 a partner. The rep --
16 MS. STEEL: Even she's not a partner, she --
17 MR. GEMMINGEN: -- she -- she was a partner in
18 HVA. But she did not have a partnership interest in
19 Manchester Development. If there had been a merger, she
20 would have emerged as a true partner.
21 The Rev. ruling 79124, which has been provided
22 by both sides to your Board in this hearing, provides
23 that -- an example where a spouse was not a partner and
24 then when the spouse's -- when the partner's spouse
25 died, the survivor did not become a partner.
26 The partnership -- while she's -- that
27 surviving spouse still maintained her community property
28 interest.
25
1 So, there's been an attempt to blur partnership
2 interests with community property interests and they're
3 two distinct items and we've stated that all along.
4 MS. STEEL: But isn't that community property?
5 And then he -- she owns that?
6 It's the same as --
7 MR. GEMMINGEN: -- it's community property.
8 MS. STEEL: -- as a community property?
9 Can I just ask you one thing about that?
10 MR. MARCIL: Sure.
11 MS. STEEL: You know, you didn't mention your
12 wife's name for that partnership. I think that's
13 biggest problem here.
14 So, can you just explain?
15 MR. MARCIL: Well, I -- my -- my wife is a
16 partner in that property. It's always been reported
17 60/40. We still own it 60/40. And she's -- she owns it
18 in -- as a partner. I don't know what -- how else to
19 tell you. She's -- she's on Exhibit B in the
20 partnership agreement. So -- and if she wasn't, she'd
21 still own it as community property. So, she's a
22 partner, either way.
23 MS. STEEL: But her mention -- her name was not
24 really mentioned on the partnership itself.
25 MR. MARCIL: It was on -- she was a partner in
26 HVA, Hollywood Vista Apartments.
27 MS. STEEL: Not for the Manchester?
28 MR. MARCIL: Not for the original Manchester,
26
1 but, remember, that that's John Walsh, okay, not us.
2 So -- and he said that the -- that we -- that
3 Manchester was going to buy a hundred percent of the
4 property. He's absolutely correct. That's the way the
5 escrow started and that's how it was opened. But that's
6 not what happened.
7 So, regardless of what our original intention
8 was, it only matters how you decide to purchase the
9 property. You can change your terms in escrow a
10 thousand times and it's still legal. It's what happens
11 -- what you decide before escrow closes, how you're
12 going to own it, how you're going to finance it, who's
13 going to -- who's going to put in how much money.
14 And we -- we decided to sell this property to
15 raise the funds because we didn't get enough funds from
16 the purchase loan. So, we decided to sell the property.
17 The purchaser of that property could not close
18 simultaneously, but there was a law that allowed us to
19 do a reverse exchange, which is exactly what we did.
20 And we took a bridge loan and loaned that money
21 to the intermediary, who became -- who ended up buying
22 the property and then later exchanged.
23 MR. PACE: May I also say something?
24 MS. STEEL: Sure.
25 MR. PACE: You can chime in here.
26 I think there actually was a practical reason.
27 HVA was a very old partnership. Carol had owned an
28 interest in it before they got married. And that's why
27
1 her interest was separately stated.
2 And then when they re-did one later on, in
3 2001, they had just titled -- started titling things in
4 his name.
5 Her community property interest was -- on the
6 exhibit to the back of the agreement as the day of
7 submitted to as well as her declaration saying it was
8 community property. So, it was, obviously, community
9 property, but they were just retitling their
10 properties -- as time had passed and they were
11 married -- in his name.
12 MS. STEEL: Okay, thank you.
13 MR. HORTON: Member Yee.
14 MS. YEE: Thank you, Mr. Chairman.
15 I want to see if I can kind of bridge the gap
16 between when this matter was last before us and what
17 we're hearing today -- maybe just posing a couple of
18 questions.
19 So, the question I believe both parties did
20 respond to, I just want to get it clear, about whether
21 federal law does require that mergers comply with State
22 entity law?
23 I think the answer was no, that the -- there is
24 no requirement that that -- that they be in compliance.
25 Franchise Tax Board?
26 MR. GEMMINGEN: That's not an issue in this
27 case.
28 MS. YEE: That's -- that's off the table?
28
1 MR. GEMMINGEN: Yes.
2 MS. YEE: Secondly, whether a merger actually
3 did occur between HVA and Manchester Development, LLC
4 for purposes of California tax law?
5 And I think as we have looked at the facts,
6 some of them, albeit, ambiguous, I think the answer here
7 is yes, but I want to kind of hear is that where we are
8 on that question?
9 MR. PACE: You're -- to me?
10 MS. YEE: Yes.
11 MR. PACE: Yeah, there was a merger under
12 California income tax law. It conforms to the federal
13 law.
14 MS. YEE: Okay.
15 MR. PACE: They did what need -- was necessary
16 for a merger. All the assets moved over and liquidated.
17 It's really kind of part of the same transaction.
18 And the larger was the 60 percent. And they
19 owned the requisite interest after -- right after the
20 transaction they owned more than 50 percent. So, that
21 caused HVA to continue.
22 MS. YEE: Okay. And Franchise Tax Board on
23 that question?
24 MR. GEMMINGEN: No, we believe there is no
25 merger here that occurred that rather the end result was
26 that Manchester Development, LLC owned the property as
27 originally intended and that these proceeds were
28 liquidated and used for Mr. Marcil's own separate
29
1 investment.
2 And that's -- exhibits 3, 5, 7 and 11 all show
3 that the Marcils knew how to admit a partner, terminate
4 a partner, merge an entity, terminate an entity. They
5 knew what they wanted to do. In this case they didn't
6 want to do that. They knew -- every other piece of
7 documentation shows their standard practice of
8 documenting fully what they wanted to do. This is a
9 fabrication.
10 MS. YEE: Okay. Let me -- let me -- just hold
11 that thought.
12 MR. GEMMINGEN: And also this -- there's no
13 factual support to show which is the survivor as well.
14 MS. YEE: Yeah.
15 MR. GEMMINGEN: Okay.
16 MR. MARCIL: Can I --
17 MR. PACE: No.
18 MS. YEE: Yeah, Mr. Marcil?
19 MR. PACE: Go ahead.
20 MR. MARCIL: Well, it doesn't matter. It's
21 either a matter of law or it isn't. Either the larger
22 entity survives or it doesn't.
23 So, regardless of what he says, I mean, and all
24 due respect, it either is the law or it isn't. It's --
25 it's that simple. I'm sorry, but it is that simple.
26 MR. PACE: I did state -- and again I
27 apologize for trying to get too much into my five minute
28 rebuttal -- but the returns did show the assets and
30
1 liabilities of both entities. And it was the only asset
2 in each of them, was the 60 percent interest and the 40
3 percent. And they were both subject to the same
4 liabilities. So, the taxpayers have always shown that
5 HVA was the larger of the two of them.
6 MS. YEE: Franchise Tax.
7 MR. MARCIL: We didn't -- we didn't need to
8 merge, it was just to get out of to doing two tax
9 returns and two LLC fees of $800. We've done that in
10 past and we've done it since and other people do it.
11 It's just a way of saving some costs, that's all, on
12 reporting. That's all it was. We didn't need the
13 merger.
14 MR. PACE: That's also why --
15 MR. MARCIL: That's the only reason.
16 MR. PACE: -- why they put the two of them
17 together by the end of 2001.
18 You know, 2001 was just a date being imposed
19 because of the -- if you went into January or February,
20 went on, you were going to have these additional -- it
21 wasn't just the $800, it was additional tax returns, it
22 was additional ledgers. It was just an additional
23 complication.
24 MS. YEE: Okay. Franchise Tax Board.
25 MR. GEMMINGEN: Well, if you go to Exhibit 4 of
26 our exhibits before you, you'll see a Certificate of
27 Interest dated May of 2001, which sets forth
28 Mr. Marcil's 60 percent in Manchester Development
31
1 Company.
2 And, so, they've later said this is a bogus
3 document, it's not to be followed and that -- so, this
4 was submitted during the audit process as well as other
5 documents. And if they don't want us to admit and
6 accept this document for purposes of determining their
7 ownership interest and the accuracy of documents, why
8 should we give any credence to any other documents in
9 this case?
10 MS. MANDEL: Hmm --
11 MR. GEMMINGEN: And as, you know, some of us --
12 I mean, it's a well-known phrase out there, you can
13 trust but you also have to verify.
14 And in this case there's no verification.
15 MR. HORTON: Member Mandel.
16 MS. MANDEL: -- thank you.
17 Your document 4 was a document that was
18 prepared -- at least the way I see it, it appears to be
19 a document that was prepared by a representative at
20 audit or protest. It doesn't appear that it was --
21 MR. THOMPSON: I think there are several
22 documents.
23 MR. GEMMINGEN: If you go on --
24 MR. THOMPSON: Which one are you referring to?
25 MS. MANDEL: I don't know what document
26 you're --
27 MR. GEMMINGEN: -- if you go back a few pages
28 within 4, to the Certificate of Interest, No. 1, should
32
1 be after a green page, it's like the third --
2 MR. THOMPSON: He's referring to -- I think, to
3 a May 9th, 2001 Certificate of Interest showing a
4 percentage here of 60 percent for Mr. Marcil in MD LLC.
5 MR. GEMMINGEN: -- so, it's like --
6 MS. MANDEL: Okay.
7 MR. THOMPSON: It's the last document in
8 Exhibit 4.
9 MS. MANDEL: Right. Well, that's what they're
10 saying 60 percent -- 60 -- 60 percent.
11 MR. GEMMINGEN: No, they're saying 2 percent.
12 That's what he swore in the last hearing was 2 percent.
13 He said this is not to be given any credence,
14 even though he signed it in May of 2001.
15 MR. HORTON: I'm so confused.
16 MR. PACE: I can explain if -- if -- if I can
17 interject?
18 MS. MANDEL: Yeah, because part of -- part of
19 what I'm -- part of what I'm hearing, the duty of
20 consistency thing is kind of irritating to me, but part
21 of what I'm -- what I take away from the FTB's argument
22 is that FTB's almost -- I get the feeling like you're
23 trying to say that if somebody hires a different
24 representative later in the process who may be more
25 familiar or may have a -- that they can't -- that they
26 can't make a better argument for a taxpayer.
27 That was the --
28 MR. GEMMINGEN: They can make better arguments,
33
1 they can't change the facts.
2 MS. MANDEL: -- well, that -- but the sense I
3 was getting was more that they can't make -- that they
4 can't make a better presentation.
5 And, so, I -- anyway, that was the -- that's --
6 that was kind of the sense I was getting.
7 But can you talk about these documents,
8 Mr. Pace?
9 MR. PACE: Yeah, I'll try to explain this.
10 First of all, we -- we never submitted any
11 bogus documents. These are just the documents that
12 happened to be in existence at the time.
13 These documents -- you to have to look back at
14 page -- and you'll see that effective September 1st,
15 2002 the ownership was reflected as being 60/40. And
16 these certificates, even though they say -- state on the
17 front of them "May 9th," I think they were prepared in
18 2002 to reflect -- to try to go back to the very
19 beginning and make it 60/40.
20 At the start they were going to be 50/50, but
21 they reworked their deal. And Mr. Marcil said that he
22 put in more money. And, so, the original 50/50 became
23 60/40. And it wasn't until 2002 that they actually went
24 through the paperwork and -- and, so, this document that
25 he's showing is really a 2002, after they had done the
26 transactions. It didn't say anything about --
27 MR. MARCIL: We had other documents besides
28 that showing 60/40 prior to that. Even our tax return
34
1 said 60/40.
2 MR. PACE: -- but it has nothing to do with the
3 two percent or 50 percent in the year in issue. This
4 was just, after the fact, trying to clean up what their
5 problem is is that they didn't do it contemporaneously.
6 When the -- they had rearranged their deal, they didn't
7 get all of the documents at that same time all prepared.
8 And, so, maybe that's -- there is some of the confusion.
9 But they did ultimately do the paperwork. They
10 did ultimately reflect their proper ownership.
11 So, these documents are 2002 documents. There
12 is nothing about the 2 percent or 50 percent. It's just
13 to reflect what their ultimate deal was.
14 MR. MARCIL: But -- but the documents at the
15 time were -- there were enough documents at the time,
16 you know what I'm saying?
17 MS. MANDEL: The deeds were --
18 MR. PACE: The deeds and --
19 MR. MARCIL: Yeah, exactly.
20 MR. PACE: -- the escrows and the cash and the
21 capital account credits and everything else was 60/40 in
22 2001.
23 MR. MARCIL: I mean, we spent a lot of money
24 on --
25 MS. MANDEL: When you say, "60/40 in 2001," you
26 mean HVA and the --
27 MR. PACE: That's right.
28 MS. MANDEL: -- okay, and the LLC?
35
1 MR. PACE: That's right.
2 MS. MANDEL: The Manchester?
3 MR. PACE: Initially. And then when it got
4 folded together, that was the ownership that was
5 reflected so that the Marcils had more than 50 percent
6 after the combination of two.
7 MR. MARCIL: Yeah, we spent our time and money
8 on getting the documents that made the exchange --
9 perfected the exchange, made it a good exchange.
10 We went back and changed -- the original
11 partnership agreement was written up as 50-50 and went
12 back and --
13 MR. PACE: Before there was any money there in.
14 MR. MARCIL: -- yeah, yeah, before -- it's just
15 an opening way that we were going to purchase this
16 property. We had it for -- we were in escrow for six
17 months.
18 It could have ended up at any possible numbers
19 because you can change your -- your escrow. We did --
20 we did amend the escrow at the end. So, there is an
21 escrow amendment. And all of exchange documents are
22 accurate.
23 And then -- then we went back to the agreement
24 and made that meet all of the other documents. But that
25 document isn't necessary for tax purposes, it's the
26 other documents that are necessary for the tax purposes.
27 MS. YEE: Can we --
28 MR. HORTON: Member Yee.
36
1 MS. YEE: -- excuse me.
2 On the question of whether Mrs. Marcil was a
3 partner in the resulting partnership, because she was
4 not listed or ever admitted as a member under the LLC
5 agreement, can one conclude that she was not a partner
6 in the resulting partnership?
7 MR. PACE: Can I --
8 MR. MARCIL: Go ahead.
9 MR. PACE: I think there's a difference between
10 State law and the income tax treatment. And that's
11 where there is some confusion here.
12 'Cause I think that under the LLC act you can
13 have her not be a named member, but under the
14 partnership tax law she's, nonetheless, a partner for
15 tax purposes. She has an economic interest and she
16 reports the income. And the authorities indicate that
17 she doesn't have to nominally be a member, but still be
18 a partner for income tax purposes. So, she cannot --
19 she -- there -- it can exist where you're not a member
20 signing the operating agreement, but you're still a
21 partner for income tax purposes.
22 MR. CORNEZ: And we would respectfully disagree
23 with that.
24 In fact, there's an example in the regulations
25 involving a two-person partnership where the husband is
26 a partner and the wife is not a partner. She may have a
27 community property interest in the partnership. If the
28 husband dies, the partnership terminates because there's
37
1 only one person now and you have to have at least two
2 people to have a partnership.
3 She -- the estate may continue to have an
4 interest in the partnership until it's wound up. But
5 the partnership terminates.
6 So, she, under community property law may have
7 an interest in -- under property rights in the
8 partnership, but she is not a partner if she is not a
9 named partner.
10 But may I -- may I suggest a bit of a refocus
11 of what's going on?
12 With respect to the termination of the
13 partnership, which partnership terminated? The question
14 under the 708 regulations is because Mr. -- because
15 both -- the partners of MDL and the partners of HVA both
16 had more than a 50 percent interest in the new
17 partnership. That's -- and that's possible the existing
18 -- the original partners of MDL and HVA after the merger
19 had more than a 50 percent interest in the new
20 partnership.
21 So, the question of which partnership legally
22 terminated under the regulations is the question of
23 which partnership contributed the fair market value of
24 assets that was greater.
25 MR. MARCIL: Net of liabilities.
26 MR. PACE: Net of liabilities.
27 That factual question is not answered by the
28 mere fact that Mr. Marcil had more than -- had 60
38
1 percent interest in the new partnership.
2 It's not a question of capital accounts. It's
3 not a question of balance sheets. It's not a question
4 of liabilities. It's fair market value of assets
5 contributed, net of liabilities. That is a fact which,
6 I -- you know, obviously, I've not gone into the files
7 as much as anyone else, but that's -- that's a factual
8 question that needs to be answered -- to know which
9 partnership survived and which partnership was
10 terminated when there was this merger?
11 MR. GEMMINGEN: I'd also like to just address
12 the -- if you don't mind -- briefly the -- the question
13 of the prior concession of the exchange.
14 It was -- the question was at that point was
15 there an exchange? And an exchange requires a review of
16 a number of transactions, both the holding, how the
17 property was held, what kind of property -- is it
18 religious property -- as well as whether there was an
19 exchange, whether the same taxpayers had the exchange
20 and then how the replacement property was held.
21 So, it's a current of time that you have to
22 look at, not a point in time. And, so, while maybe at a
23 point in time it -- it satisfies that point's
24 requirement, you still have the subsequent holding
25 requirement and who's doing the holding and who's doing
26 the operating of that property.
27 So, just a focus on one point in time is -- is
28 incorrect.
39
1 MS. YEE: Are there -- along that course, are
2 there limits in time in terms of how long you can hold
3 the property?
4 MR. GEMMINGEN: Well, gifts, after eight months
5 of holding to a taxpayer's children, were deemed to be
6 insufficient in time. So, there's no white or black
7 letter law as far as division of time between like one
8 year, two years, five years within this regulation. It
9 looks at what's the intent of the parties at the time
10 the property was acquired? What was set up? Other
11 extraneous circumstances -- and in this case we clearly
12 have a -- an entity set up to acquire 100 percent of
13 this property, which that property was funneled over to.
14 MR. PACE: I don't know if I can speak without
15 having a question directed to me?
16 MS. YEE: Mr. Pace.
17 MR. PACE: There were just a couple of points I
18 wanted to clarify.
19 One, in their opening brief they said,
20 "The fatal flaw in the 1031 exchange is the
21 fact that HVA did not hold the replacement
22 property, the Manchester property, for any
23 productive use in a trade or business or for
24 investment."
25 That's -- that's what they stated here. And
26 they go on, it's because HVA went away and did this
27 conveyance in State law, this is what bothers them.
28 So, he made an admission at the last hearing.
40
1 They made an admission in the prior pleadings. I don't
2 know, it seems pretty clear to me that they've conceded
3 that the 1031 exchange was good, but for the fact that
4 HVA got rid of the property too quick in their -- in
5 their minds.
6 MR. GEMMINGEN: Well, HVA also terminated.
7 They couldn't hold the property.
8 MR. PACE: And, secondly, the -- in their
9 exhibits, Exhibit N, they have the capital accounts
10 here, it shows the value of the properties being
11 contributed. And they're 60/40. And those properties
12 came from HVA.
13 So, the numbers show that there was, in fact,
14 the requisite larger fair market value, the assets
15 contributed.
16 MS. YEE: Let -- let me pose my last question
17 to Appeals.
18 We've heard a lot, can you just try to help
19 crystallize our focus here? The issue is whether the --
20 the partnership satisfied the like kind exchange
21 requirement --
22 MR. THOMPSON: Right.
23 MS. YEE: -- right?
24 So, given what we've heard from both sides --
25 MR. THOMPSON: Right.
26 MS. YEE: -- what ought our focus be?
27 MR. THOMPSON: You know, I think I would
28 caution the Board with FTB's statement that we are
41
1 looking at a stream of time.
2 I think in the Bolker case, I think in Maloney
3 as well, they said we're primarily concerned with the
4 time of the exchange. And they may look to other
5 elements to -- to -- to determine what the intent was,
6 and if they -- if there was a prearranged transaction
7 prior, which I think is FTB's point -- that may affect
8 the analysis. But I think that's the key, the intent at
9 the time of the exchange.
10 And I think also the courts have looked at
11 whether there was a cash out of the property and whether
12 the two properties were of like kind.
13 And, you know, Appellants' position here is at
14 bottom they started with an interest in a partnership
15 and they ended with an interest in a partnership -- both
16 holding similar rental property.
17 I appreciate FTB's view here is that, as I
18 understand it, is that, in effect, I think what happened
19 from FTB's view is that HVA exchanged a -- one property
20 for an interest in another partnership, in MD LLC, and
21 -- and you can't -- and that's the substance of it from
22 FTB's perspective.
23 But I think that the courts have focused, A, on
24 the intent and time of the transaction to hold for
25 business or investment purpose and -- and, B, also
26 whether there was any -- uh -- cash out -- uh, that
27 would disqualify from a 1031.
28 MS. YEE: Thank you.
42
1 Thank you, Mr. Chairman.
2 MR. HORTON: Further discussion, Members?
3 Hearing none, is there a motion?
4 MS. YEE: Move to take the matter under
5 submission.
6 MR. HORTON: Moved by Member Yee to take the
7 matter under submission, second by Member Runner.
8 Without objection, Members, such will be the
9 order.
10 Thank you very much for appearing before us
11 today.
12 MR. PACE: Thank you so much.
13 MR. HORTON: The Board will take your matter
14 under consideration later on this evening and send you a
15 written report of our decision.
16 ---o0o--
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1 REPORTER'S CERTIFICATE.
2
3 State of California )
4 ) ss
5 County of Sacramento )
6
7 I, JULI PRICE JACKSON, Hearing Reporter for the
8 California State Board of Equalization certify that on
9 OCTOBER 23, 2012 I recorded verbatim, in shorthand, to
10 the best of my ability, the proceedings in the
11 above-entitled hearing; that I transcribed the shorthand
12 writing into typewriting; and that the preceding pages 1
13 through 43 constitute a complete and accurate
14 transcription of the shorthand writing.
15
16 Dated: November 27, 2012
17
18
19 ____________________________
20 JULI PRICE JACKSON
21 Hearing Reporter
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